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section 852(b)(2)(F). Enter the result on line

See section 1563(d)(1) for the definition

Line 8–Total Tax

b of the worksheet.

of “stock” for purposes of determining stock

Include any deferred tax on the termination

ownership above.

Line c. The RIC’s net unrealized built-in

of a section 1294 election applicable to

gain is the amount, if any, by which the FMV

shareholders in a qualified electing fund in

Question 5

of the assets of the RIC at the beginning of

the amount entered on line 8. See Form

Check the “Yes” box if one foreign person

its first RIC year (or as of the date the

8621, Part V, and “How to report”, below.

owned at least 25% of (a) the total voting

assets were acquired, for any asset with a

power of all classes of stock of the RIC

Subtract from the total for line 8 the

basis determined by reference to its basis

entitled to vote or (b) the total value of all

deferred taxes on the RIC’s share of the

(or the basis of any other property) in the

classes of stock of the RIC.

undistributed earnings of a qualified electing

hands of a C corporation) exceeds the

fund (see Form 8621, Part II).

The constructive ownership rules of

aggregate adjusted basis of such assets at

section 318 apply in determining if a RIC is

that time.

How to report. Attach a schedule showing

foreign owned. See section 6038A(c)(5) and

the computation of each item included in, or

Enter on line c the net unrealized built-in

the related regulations.

subtracted from, the total for line 8. On the

gain reduced by the net recognized built-in

dotted line next to line 8, enter the amount

Enter on line 5b(1) the percentage

gain for prior years. See sections 1374(c)(2)

owned by the foreign person specified in

of tax or interest, identify it as tax or interest,

and (d)(1).

question 5. For line 5b(2), write the name of

and specify the code section that applies.

the owner’s country.

Line d. If the amount on line b exceeds

the amount on line a, the excess is treated

Note. If there is more than one

as a recognized built-in gain in the

25%-or-more foreign owner, complete lines

Schedule K–Other

succeeding tax year.

5b(1) and 5b(2) for the foreign person with

the highest percentage of ownership.

Information

Line e. Enter the section 1374(b)(2)

Foreign person. The term “foreign person”

deduction. Generally, this is any net

The following instructions apply to questions

includes:

operating loss carryforward or capital loss

1 through 11 on page 3 of the form.

•

A foreign citizen or nonresident alien.

carryforward (to the extent of net capital

Complete all items that apply.

•

An individual who is a citizen of a U.S.

gain included in recognized built-in gain for

possession (but who is not a U.S. citizen or

the tax year) arising in tax years for which

Question 3

resident).

the RIC was a C corporation. A capital loss

•

Check the “Yes” box for question 3 if the

A foreign partnership.

carryforward must be used to reduce

•

RIC is a subsidiary in a parent-subsidiary

A foreign corporation.

recognized built-in gain for the tax year to

•

controlled group (defined below). This

Any foreign estate or trust within the

the greatest extent possible before it can be

applies even if the RIC is a subsidiary

meaning of section 7701(a)(31).

used to reduce the investment company

•

member of one group and the parent

A foreign government (or one of its

taxable income.

corporation of another.

agencies or instrumentalities) to the extent

Line h. Credit carryforwards arising in

that it is engaged in the conduct of a

Note. If the RIC is an “excluded member” of

tax years for which the RIC was a C

commercial activity as described in section

a controlled group (see section 1563(b)(2)),

corporation must be used to reduce the tax

892.

it is still considered a member of a controlled

on net built-in gain for the tax year to the

group for this purpose.

Owner’s country. For individuals, the term

greatest extent possible before the credit

“owner’s country” means the country of

Parent-subsidiary controlled group. The

carryforwards can be used to reduce the tax

residence. For all others, it is the country

term “parent-subsidiary controlled group”

on the investment company taxable income.

where incorporated, organized, created, or

means one or more chains of corporations

Line i. The RIC’s tax on the net

administered.

connected through stock ownership (section

recognized built-in gain is treated as a loss

Requirement to file Form 5472. If the RIC

1563(a)(1)). Both of the following

sustained by the RIC after October 31 of the

checked “Yes,” it may have to file Form

requirements must be met:

same tax year. Deduct the tax attributable

5472, Information Return of a 25% Foreign

1. At least 80% of the total combined

to:

Owned U.S. Corporation or a Foreign

•

voting power of all classes of voting stock

Ordinary gain as a deduction for taxes on

Corporation Engaged In a U.S. Trade or

entitled to vote or at least 80% of the total

Form 1120-RIC, line 12.

Business. Generally, a 25% foreign-owned

•

value of all classes of stock of each

Short-term capital gain as a short-term

corporation that had a reportable transaction

corporation in the group (except the parent)

capital loss on Schedule D (Form 1120), line

with a foreign or domestic related party

must be owned by one or more of the other

during the tax year must file Form 5472. See

•

corporations in the group and

Long-term capital gain as a long-term

Form 5472 for filing instructions and

2. The common parent must own at

capital loss on Schedule D (Form 1120), line

penalties for failure to file.

least 80% of the total combined voting

power of all classes of stock entitled to vote

Item 8

How to report. If the RIC checked the

or at least 80% of the total value of all

“Other” box, attach a schedule showing the

classes of stock of one or more of the other

Tax-exempt interest. Show any

computation of each item included in the

corporations in the group. Stock owned

tax-exempt interest received or accrued.

total for line 7, Schedule J; identify the

directly by other members of the group is

Include any exempt-interest dividends

applicable code section and the type of tax

not counted when computing the voting

received as a shareholder in a mutual fund

or interest.

power or value.

or other RIC.

Built-in Gains Tax Worksheet (keep for your records)

Excess of recognized built-in gains over recognized built-in losses . . . . . . . . . . . . . . . . . . . . . . . a.

b. Taxable income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b.

Enter the net unrealized built-in gain reduced by any net recognized built-in gain for all prior years c.

d. Net recognized built-in gain (enter the smallest of lines a, b, or c) . . . . . . . . . . . . . . . . . . . . . . . d.

Section 1374(b)(2) deduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . e.

Subtract line e from line d. If zero, enter -0- here and on line i . . . . . . . . . . . . . . . . . . . . . . . . . . f.

g. Enter 35% of line f . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . g.

h. Business credit and minimum tax credit carryforwards under section 1374(b)(3) from C corporation h.

Tax. Subtract line h from line g (if zero or less, enter -0-). Enter here and include on line 7 of

Schedule J (see instructions) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i.

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Instructions For Form 1120-Ric - U.s. Income Tax Return For Regulated Investment Companies - 2005 Page 11

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